Western Australia’s Property Boom Faces a New Test

After several years of exceptional growth, the Western Australian property market enters the new financial year as Australia’s strongest-performing housing market. Perth has outperformed every other capital city, driven by population growth, housing shortages, a strong resources sector and relative affordability compared to Sydney and Melbourne.

However, the next 12 months are likely to look different from the rapid growth experienced between 2023 and 2026.

Higher interest rates, proposed Federal Budget changes affecting investors, affordability constraints and growing uncertainty surrounding tax policy are beginning to influence buyer behaviour. The key question for homeowners, investors and first-home buyers is whether Perth can continue its remarkable run or whether the market is approaching a period of consolidation.

The Current State of the WA Property Market

Perth remains Australia’s strongest housing market by most measures.

Recent market data shows Perth dwelling values have increased by more than 25% over the past year, with median house prices exceeding $1 million in some reports. Despite these substantial gains, housing supply remains well below historical averages and demand continues to exceed available stock.

Key factors supporting the market include:

• Ongoing population growth and interstate migration.
• Strong employment conditions linked to mining and energy sectors.
• Low housing supply.
• Tight rental vacancy rates.
• Relative affordability compared to eastern states capitals. These structural factors continue to provide a strong foundation for the WA market.

Interest Rates Remain the Biggest Short-Term Risk

One of the most significant headwinds facing the property market is the Reserve Bank’s recent tightening cycle.

Several market commentators expect elevated interest rates to place pressure on borrowing capacity and reduce the number of buyers able to compete at current price levels. Some economists have warned that higher borrowing costs may trigger a cooling in Australia’s broader housing market.

For Perth, however, the impact may be more muted than in Sydney or Melbourne because:

• WA property remains relatively affordable.
• Population growth remains strong.
• Rental yields are generally higher.
• Supply shortages remain severe.

While higher rates may slow growth, they are unlikely to completely reverse the underlying supply-demand imbalance.

Federal Budget Changes Could Reshape Investor Behaviour

The 2026 Federal Budget introduced some of the most significant proposed property tax reforms in decades.

Key proposals include:

• Restricting negative gearing on established properties for future purchases.
• Replacing the 50% Capital Gains Tax discount with an indexation-based system.
• Changes affecting trust structures and discretionary trust distributions. These reforms are expected to influence investor demand across Australia.

Some property industry leaders have warned the changes could create a “seismic shift” in residential investment markets by reducing investor participation and potentially limiting future rental supply.

For Western Australia, the effect may be less severe than in Sydney and Melbourne because many investors continue to be attracted by Perth’s strong rental yields and comparatively affordable entry prices.

Supply Shortages Continue to Support Prices

The strongest argument for continued price growth in WA remains simple: there are still not enough homes available.

Industry reports indicate:

• Listings remain significantly below long-term averages.
• Construction activity continues to struggle with labour shortages and rising costs.
• Population growth remains robust.
• Demand continues to exceed new housing supply.

Until housing supply catches up, downward pressure on prices is likely to remain limited.

This is particularly important in Perth’s affordable and middle-market suburbs where first-home buyers and owner-occupiers remain active.

Will Perth Property Prices Continue to Rise?

Most forecasts suggest Perth will continue growing over the next 12 months, although at a slower pace than recent years.

Several analysts forecast WA property growth between 5% and 10% over the coming year, while others expect growth to moderate further as affordability constraints begin to bite.

Our base-case scenario is:

Base Case (Most Likely)

• Perth property prices rise between 4% and 8%.
• Unit markets outperform detached housing.
• Rental growth remains positive.
• Investor demand softens but remains supportive.

Upside Scenario

• Interest rates stabilise.
• Population growth remains strong.
• Housing supply remains constrained.
• Perth records another year of double-digit growth.

Downside Scenario

• Additional rate rises occur.
• Federal Budget reforms significantly reduce investor activity.
• Listings increase materially.
• Growth slows to low single digits or prices stagnate.

Which Areas Are Likely to Perform Best?

If growth continues, the strongest performing segments are likely to be:

Affordable Family Suburbs

Demand from owner-occupiers remains strongest where affordability is still relatively attractive.

Townhouses and Units

As house prices rise, more buyers are shifting towards medium-density housing and apartments. Unit markets are already outperforming in several Perth regions.

Regional WA Centres

Mining and infrastructure investment continue supporting demand in selected regional centres including parts of the Pilbara, Bunbury, Geraldton and Albany.)

What Are Buyers and Investors Saying?

Interestingly, community sentiment appears divided.

Many investors and homeowners remain bullish on Perth due to ongoing supply shortages and economic strength. Others believe affordability pressures and policy changes may finally slow the market. Recent discussions among Perth property observers suggest that while price growth may moderate, most participants expect values to remain resilient rather than experience a significant correction.

The consensus appears to be shifting from “property boom” to “property consolidation.”

Outlook for the Next 12 Months

The Western Australian property market is unlikely to repeat the extraordinary growth rates seen over the past three years.

However, unlike some eastern states markets facing greater affordability challenges and weaker fundamentals, Perth continues to benefit from powerful structural drivers.

The most likely outcome over the next 12 months is:

• Slower but positive price growth.
• Continued rental market strength.
• Strong demand from owner-occupiers.
• Reduced but ongoing investor activity.
• Increased focus on affordable housing and medium-density developments.

While interest rates and Federal Budget reforms may cool the pace of growth, the fundamental supply shortage across Western Australia is likely to prevent any major correction in the foreseeable future.

For long-term investors, Perth remains one of Australia’s most compelling property markets, although careful suburb selection and cash-flow analysis will become increasingly important as the market matures.

Frequently Asked Questions

Will Perth property prices fall in 2026–2027?

A major decline appears unlikely unless housing supply increases significantly or economic conditions deteriorate sharply. Most forecasts point towards slower growth rather than a substantial correction.

How will higher interest rates affect the WA market?

Higher rates reduce borrowing capacity and may slow demand. However, Perth’s affordability advantage and strong rental yields provide some protection compared to Sydney and Melbourne.

Will Federal Budget changes hurt property investors?

The proposed changes to negative gearing and capital gains tax may reduce investor demand, particularly for established properties. However, WA’s strong rental market may continue attracting investors seeking yield.

Are units a better investment than houses in Perth?

Units and townhouses may outperform houses in some areas as affordability pressures push buyers towards lower-priced housing options.

Is Perth still Australia’s strongest property market?

Based on recent growth rates, rental conditions and supply shortages, Perth remains one of the strongest-performing property markets in Australia.

Sources:

• CoreLogic
• REIWA
• AFR.com

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

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